The issue for many insurers is they were encouraged to participate in the exchange in return for a temporary risk sharing program called Risk Corridors. Under this program, all insurers paid into a pot of money and the firms suffering excessive losses were to share the funds based on a formula. However, a budget deal passed late in 2014, the ‘Cromnibus’ Spending Bill, required the program to be budget neutral. The losses far exceeded the pot of money collected by the program. Insurers have only received about $0.13 cents on the dollar of what they would have gotten under an opened-ended program.

The Centers for Medicare and Medicaid Services (CMS) has affirmed insurers will get their money. But the question is: where it is going to come from? CMS has $363 million to divvy up while insurers have requested $2.87 billion.

Why are insurers losing so much money? In my original article, I stated the exchange plans are suffering adverse selection due to the perverse regulations which drive up costs – making health coverage a bad deal for all but the sickest enrollees. The only people enrolling are those who are eligible for the most generous subsidies. Consider what Larry Levitt, a health insurance analyst with the Kaiser Family Foundation, told Bloomberg.

“The ACA marketplaces are not yet profitable for most insurers,” “It’s going to take enrollment growth, especially among healthy people, to make it an attractive market for insurers. If enrollment stagnates, we could very well see insurers thinking twice about their participation.”

The solution cannot be gouging healthy people so runaway costs are covered. The Affordable Care Act was support to slow the growth in health expenditures. Just about any economist will tell you the current system is not accomplishing that. Slowing spending requires appropriately-designed health plans with positive incentives among enrollees. The ACA’s cost-control mechanisms are the opposite of that; they’re akin to pouring gasoline on a fire in hopes it will put it out.

Why not scrap the perverse ACA regulations and admit it was a pipe dream to ever assume young, healthy people could be coerced into paying several times their expected costs to cover other people’s excessive spending. Young people already have a lower demand for health coverage because they don’t expect to need care. As I reported earlier in the week, healthy people also know they’re getting a raw deal when they are expected to pay $5,000 for health plans that require an additional $6,000 in spending before the plans will begin to pay claims. Justice Roberts called the penalty a “tax.” I know people spending $5,000 for health plans they get no benefit from. They certainly think in terms of their $5,000 premiums as another Obamacare tax they can ill afford.

– See more at: http://healthblog.ncpa.org/large-insurer-may-exit-exchange-the-exchange-system-is-collapsing-under-its-own-weight/#sthash.0PtYewJc.dpuf